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Is Ala Moana The New Kakaako?

Growing up in Waianae, Linda Nakagawara remembers getting really excited when her family would take a trip into town to Ala Moana Center. It was a big deal back then, browsing at Woolworth and looking at the fancy dresses at Ethel’s.

Nakagawara loved Ala Moana so much that eventually she decided to buy an apartment there, a one-bedroom unit in a four-story walkup.

But the neighborhood has changed a lot over the years. Units in brand-new luxury towers sell for millions of dollars. The mall replaced Sears with Bloomingdale’s. And Nakagawara, 64, feels like the area doesn’t offer much anymore for local working-class people like her.

The redevelopment of adjacent Kakaako has been underway for the past five years, transforming warehouses, parking lots and auto shops into luxury high rises and hip shopping areas.

Now, Ala Moana, sandwiched between Kakaako and Waikiki, figures to be the next area to undergo a building boom.

Linda Nakagawara sits at Pawaa Inha Park. She’s planning to move to New Mexico next year because she can’t afford to retire here.

Cory Lum/Civil Beat

Nakagawara senses what’s coming. Diamond Head is getting harder to see from her lanai behind the city’s high rises. On Saturday morning, she sits outside of the Starbucks on Ward Avenue in Kakaako where brand-new shiny towers dot the skyline, shaking her head.

“This is not the Hawaii I remember growing up,” she says.

The city created a new temporary permit intended to jump start taller, denser development in anticipation of planned stations for the Honolulu rail project. Developers have only submitted a few applications but so far they’re concentrated in Ala Moana.

The proposals would make the neighborhood more walkable and bike-friendly, exactly the type of development that the city is hoping rail will bring. But the plans also include hundreds of expensive hotel and condo units that would replace small businesses — and some fear, eventually replace cheaper, low-rise housing and force many long-time residents out of the area.

Ala Moana’s skyline is expected to change with an influx of new towers.

Cory Lum/Civil Beat

Kakaako is a state redevelopment district and credit for the new landscape there — or blame, depending whom you ask — largely goes to former Gov. Neil Abercrombie’s administration.

Ala Moana is the first neighborhood where the city’s vision for redeveloping the urban core is becoming a reality, the culmination of years of planning and meetings with residents and developers. A draft plan for revitalizing the neighborhood has been submitted to the City Council.

“It really calls for a fairly significant amount of development,” explains Harrison Rue, who is in charge of managing development around rail in Mayor Kirk Caldwell’s administration.

When most people hear Ala Moana, they think about the sprawling shopping center.

But the neighborhood is also home to a mix of expensive high rises and aging walkups. Dive bars and hostess lounges are tucked away in side streets behind big-box stores like Ross and Sam’s Club, and alongside Korean restaurants and mom-and-pop stores.

U.S. Census data from 2015 estimates there are just over 5,700 people living in Ala Moana. Forty percent speak a language other than English, and there is such a large community of Korean immigrants that state lawmakers even contemplated designating part of the district as Koreatown. But some property owners pushed back, fearing it would drag down values.

Koreatown never happened, and during the past five years, condo resale prices have steadily risen, according to data from the real estate company Locations. Buoyed by a hot real estate market statewide, the median price of a condo in Ala Moana rose from $162,500 in 2012 to $340,000 in 2017. The company’s analysis focused on an L-shaped sliver of the Census-designated neighborhood.

The makeup of Ala Moana is already changing. According to the Census, the median household income rose from about $55,000 in 2010 to more than $84,000 in 2015. The number of housing units worth more than $1 million doubled over that period too. (One caveat: The boundaries in the Census-designated district overlap with a portion of Kakaako.)

Several new high-rises are in the works. There’s a luxury hotel-condo that’s supposed to replace the 7-Eleven and other businesses across the street from the Convention Center.

Jim Ratkovich, managing director at the California private equity firm Salem Partners, says the project is supposed to break ground in the second quarter of next year. The company also recently got approval for another high-end hotel on Kapiolani Boulevard and Makaloa Street across from Ala Moana Center, replacing the Heald College building.

Ratkovich says the company also has its eye out for more potential projects.

The City Council approved this luxury hotel at 1500 Kapiolani across from Ala Moana Center. The developer is partnering with a nonprofit to provide senior housing above the parking lot, but that will require millions in taxpayer dollars.

City & County of Honolulu

Not all the new developments come with luxury price tags. Korean investors have sold out units at Kapiolani Residence, where 60 percent of units are targeted to people with moderate incomes — no more than $84,480 for an individual or $120,600 for a family of four. The city is also reviewing plans by ProsPac Holdings to build a 41-story residential tower across from Walgreens on the corner of Keeaumoku and Makaloa which would include more than 80 low-income rentals.

While some Ala Moana residents are excited about the changes and potential for higher property values, many like Nakagawara are worried.

“Hawaii belongs to the local people but they’re pushing us out of the areas we live in and areas we love,” she says.

Anxiety Among Some Renters

Gloria Allen, an appointment receptionist and union representative at Kaiser, lives in a two-story walk-up along Makaloa Street near Wal-Mart. When she moved in 15 years ago, her rent was about $800. Today it’s still under $1,000.

Correction: An earlier version of the story had an incorrect first name for Gloria Allen.

Allen says she’s worried about whether her landlord will decide to sell or redevelop the property. She’s not sure what she’d do if that happens.

Ala Moana resident Gloria Allen stands at the intersection of Kapiolani Boulevard and Keeaumoku Street. She wonders whether her landlords will raise her rent now that Ala Moana is getting more luxury high rises.

Cory Lum/Civil Beat

“We don’t have a magic solution for that,” says Rue.

The Caldwell administration has been pushing a bill that would require new developments to provide a certain percentage of units to people with moderate or low incomes. But many developers have been highly critical of that proposal, saying the math doesn’t pencil out. In any case, those units wouldn’t stay affordable forever.

The city also wants to give developers an option to refurbish the low-rise buildings like the one where Allen lives. So far though, no developers have taken up that option.

Christine Camp, a local developer who leads Avalon Group, says rents could actually decrease if more units are built. Her company might apply to build a project that would include more than 100 low-income rentals.

“When you have influx of more rental properties that come in, rents go down,” she says. When her company built more than 200 rental units in Hawaii Kai recently, they got letters from landlords complaining that the development drove rents down.

But Ricky Cassiday, a real estate researcher, says Allen’s concerns are not unfounded.

One of the high-rise towers proposed by Chinese investors in Ala Moana. The applications are currently pending at the Honolulu City Council.

Hawaii City Plaza

“The landlords, the investors of those units will say to themselves, ‘You know… these new units pushed up the average rent. We can’t exactly match them amenity for amenity but we certainly can fix up our units and raise the rents,’” Cassiday says.

“Or simply ride the rising tide of the market, do nothing to our units and ride the tide going up.”

Allen still goes to the mall in the early mornings and drinks coffee from McDonald’s along with other seniors. But she always leaves before the crowds come. Like Nakagawara, Allen doesn’t feel like she belongs there anymore.

“I think we are going to be driven out,” Allen says.

Rising Property Values

Some residents welcome the new development. William Ammons is a member of the Ala Moana/Kakaako Neighborhood Board and a planner at the Honolulu permitting department. He bought an apartment in Ala Moana for $179,000 in 2008 when he moved to Hawaii from Florida and says it was the best decision that he ever made.

Ammons estimates its value has appreciated $10,000 each year for the past decade, and expects it to continue to grow.

That’s not to say there aren’t downsides to more density. Ammons isn’t happy that more high rises will make it harder to find a parking spot. And he expects lots of his neighbors will get upset when they realize that new towers are blocking their views.

William Ammons is a city planner who says it’s futile to require developers to build low-income units in a neighborhood where property values are so high.

Cory Lum/Civil Beat

As for renters, the 57-year-old thinks that property values in Ala Moana are too high to build low-income units and people who can’t afford to live there should move to cheaper areas like the west side of Oahu.

Rue from the city says that the idea is to make development in Ala Moana “a little bit more locally focused” with housing that’s targeted to Hawaii residents more so than in Kakaako. Plus, the market for luxury units has slowed down.

Camp from Avalon Group hasn’t submitted an application for her project yet, but estimates it would include up to 800 units and half would be part of a hotel-condominium complex. Apart from 100 low-income rentals, about 350 units would be between $550,000-$900,000 each, which she says local people could afford.

Rue says, “That’s kind of in keeping with the area. It’s a major mall and it’s also got Sam’s Club and Wal-Mart and a lot of local malls and local services and everyone’s doctors and dentist.”

But even dentists have been worried about rents going up. A group of them who rent commercial space at the shopping center lobbied the City Council to pass a bill saying that health care services should be preserved as the neighborhood redevelops.

Ala Moana residents are worried that traffic will get worse with new developments on the horizon.

Cory Lum/Civil Beat

Allen wants to persuade other renters to go to neighborhood board meetings and talk about their concerns.

But she hasn’t had any luck yet. Some are recent immigrants from the Marshall Islands whom Allen says are afraid of speaking out.

Meanwhile, Nakagawara says she’s planning to move to New Mexico next year. She says she’s turning 65 and can’t afford to retire in Hawaii on her savings from her career as a hotel cook. As for influencing the future direction of Ala Moana, she’s resigned.

“It’s too late, because it’s happening,” she says.

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